0
Chapter 25
!

Production
and
Growth
Saudi Arabia Energy
Consumption
Buying
Production
Selling	


Today

2030?

Future
U.S. Energy
Production
Selling
Consumption
Buying	


Today

2030?

Future
Subsidize Petrol?
Price

Too much 	

and 	

too cheap

Supply - Market
Supply - Subsidize

Pm
Ps

Qm Qs

Demand
Quantity
Profit attracts Innovation
Innovation drops
cost	

allowing price to 	

also drop

Price

Innovation

Innovation

Innovatio...
Whales to 747s
ideas	

technology	

methods	


Intellectual

Human

trust	

knowledge	

skills	

personality	

health	

relationships	


...
Productivity
Output	

divided by
Input
How do we go 	

from this...

to this?
1800
Population

2010

one billion seven billion

Change
7x

Life Expectancy

26 years

66 years

40 +

GDP Per Capita Per...
GDP 	

Per Capita
GDP: $70,000,000,000,000
Population: 7,000,000,000	

GDP Per Capita: $10,000
Source:
https://www.google....
Rates
and
Compounding
Linear
versus
Exponential
Linear versus Exponential	

Adding versus Compounding
64

64

^

56
48
40
32

32

24
16

16

8
0 2
1

+

4

2

8
6

8

3

...
Rule of 70s	

Years to Double
70 	

divided by 	

the rate of growth

70	

Rate of Growth
Rate
1%
2%

Years to
Double
70 ÷ 1 = 70
70 ÷ 2 = 35

Size in 	

70 years?
2x
4x

3%

70 ÷ 3 = 23.3

8x

4%
5%

70 ÷ 4 = 17...
Why do 	

Standards of Living
differ?
One word
!

Productivity
Productivity
Better at
making stuff
What is Wealth?
What people want
What is Capital?
Anything that helps you
create wealth
Five Types of Capital
Cultural
Human
Physical
Intellectual
Financial
Cultural
Capital
Worldview
Political
Legal
Economic
Cultural Capital
How people
view and treat other
people
!

Expectations
Cultural Capital
Property Rights	

Rule of Law	

Political Stability
No peace ... No prosperity
Lady	

Justice
Weight of the
evidence	

versus	

Status of the
parties
Human
Capital
I look for three things in
hiring people.
!

The first is personal
integrity, the second is
intelligence, and the third
is ...
Trust
Integrity
Competence
Human Capital
Trust
Knowledge and Skills
Health and Nutrition
Social Relationships
Health & Nutrition
Physical Capital
Two types
Tools
Natural Resources
Water, Oil, Minerals
Physical Capital
Tools we use to make stuff
!

Natural Resources
Renewable
Non-renewable
!
Intellectual Capital
Technology
How the world works
How we make
smart things and make
things smart
Research and
Development
Patent System	

20 Year Monopoly on
your idea
Intellectual Capital

Human Capital
Financial Capital
Money
!

Allows us to store
labor and shift time
Spend or Save?
Savings	

versus 	

Consumption
Three Steps
Save instead of consume	

Investment in new capital	

Increase productivity
Capital Allocation

Right capital at the right time
Innovation - Productivity
Continuous Innovation
Education
Each year in school
adds 10 percent to
income	

!

Invest versus consume
Population Growth
More people	

Smaller slices
GDP

GDP 	

per capita

Grow the pie
faster than
population
Population Growth
A smaller slice
of a larger pie
is bigger than a
larger slice of
a smaller pie
How you
slice the pie

Culture
determines
the size of
the pie
!
U.S. Farmers	

1800 - 90 percent	

1900 - 45 percent
U.S. Farmers	

2012 - 2 percent
Productivity Growth
More people	

More ideas	

More innovation	

More wealth
Quiz	

1. What are the five types of capital?	

2. What is global GDP per capita?	

3. If a country is growing at 5 percent...
Upcoming SlideShare
Loading in...5
×

Eco 202 ch 25 production and costs

798

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
798
On Slideshare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Transcript of "Eco 202 ch 25 production and costs"

  1. 1. Chapter 25 ! Production and Growth
  2. 2. Saudi Arabia Energy Consumption Buying Production Selling Today 2030? Future
  3. 3. U.S. Energy Production Selling Consumption Buying Today 2030? Future
  4. 4. Subsidize Petrol? Price Too much and too cheap Supply - Market Supply - Subsidize Pm Ps Qm Qs Demand Quantity
  5. 5. Profit attracts Innovation Innovation drops cost allowing price to also drop Price Innovation Innovation Innovation Innovation Price Cost Time
  6. 6. Whales to 747s
  7. 7. ideas technology methods Intellectual Human trust knowledge skills personality health relationships Entrepreneur money and risk savers and borrowers time is money Culture Financial (1+r)n insurance   limited liability corporations Physical natural resources time buildings equipment things than make things
  8. 8. Productivity Output divided by Input
  9. 9. How do we go from this... to this?
  10. 10. 1800 Population 2010 one billion seven billion Change 7x Life Expectancy 26 years 66 years 40 + GDP Per Capita Per Day $3 $30 10 x
  11. 11. GDP Per Capita GDP: $70,000,000,000,000 Population: 7,000,000,000 GDP Per Capita: $10,000 Source: https://www.google.com.sa/publicdata/explore? ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&tdim=true&dl=en&hl=en&q=world%20gdp#! ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=region&ifdim=regi on&tdim=true&hl=en_US&dl=en&ind=false
  12. 12. Rates and Compounding Linear versus Exponential
  13. 13. Linear versus Exponential Adding versus Compounding 64 64 ^ 56 48 40 32 32 24 16 16 8 0 2 1 + 4 2 8 6 8 3 4 10 5 12 6
  14. 14. Rule of 70s Years to Double 70 divided by the rate of growth 70 Rate of Growth
  15. 15. Rate 1% 2% Years to Double 70 ÷ 1 = 70 70 ÷ 2 = 35 Size in 70 years? 2x 4x 3% 70 ÷ 3 = 23.3 8x 4% 5% 70 ÷ 4 = 17.5 70 ÷ 5 = 14 16 x 32 x
  16. 16. Why do Standards of Living differ? One word ! Productivity
  17. 17. Productivity Better at making stuff
  18. 18. What is Wealth? What people want
  19. 19. What is Capital? Anything that helps you create wealth
  20. 20. Five Types of Capital Cultural Human Physical Intellectual Financial
  21. 21. Cultural Capital
  22. 22. Worldview Political Legal Economic
  23. 23. Cultural Capital How people view and treat other people ! Expectations
  24. 24. Cultural Capital Property Rights Rule of Law Political Stability No peace ... No prosperity
  25. 25. Lady Justice Weight of the evidence versus Status of the parties
  26. 26. Human Capital
  27. 27. I look for three things in hiring people. ! The first is personal integrity, the second is intelligence, and the third is a high energy level. ! But of you don’t have the first, the other two will kill you. ! - Warren Buffett, CEO, Berkshire Hathaway
  28. 28. Trust Integrity Competence
  29. 29. Human Capital Trust Knowledge and Skills Health and Nutrition Social Relationships
  30. 30. Health & Nutrition
  31. 31. Physical Capital Two types Tools Natural Resources Water, Oil, Minerals
  32. 32. Physical Capital Tools we use to make stuff ! Natural Resources Renewable Non-renewable !
  33. 33. Intellectual Capital Technology How the world works How we make smart things and make things smart
  34. 34. Research and Development Patent System 20 Year Monopoly on your idea
  35. 35. Intellectual Capital Human Capital
  36. 36. Financial Capital Money ! Allows us to store labor and shift time
  37. 37. Spend or Save? Savings versus Consumption
  38. 38. Three Steps Save instead of consume Investment in new capital Increase productivity
  39. 39. Capital Allocation Right capital at the right time
  40. 40. Innovation - Productivity
  41. 41. Continuous Innovation
  42. 42. Education Each year in school adds 10 percent to income ! Invest versus consume
  43. 43. Population Growth More people Smaller slices GDP GDP per capita Grow the pie faster than population
  44. 44. Population Growth A smaller slice of a larger pie is bigger than a larger slice of a smaller pie
  45. 45. How you slice the pie Culture determines the size of the pie !
  46. 46. U.S. Farmers 1800 - 90 percent 1900 - 45 percent
  47. 47. U.S. Farmers 2012 - 2 percent
  48. 48. Productivity Growth More people More ideas More innovation More wealth
  49. 49. Quiz 1. What are the five types of capital? 2. What is global GDP per capita? 3. If a country is growing at 5 percent, how long will it take to double GDP? 4. What is productivity? 5. Name two types of physical capital.
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×